QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 333-146093

MOMENTIVE PERFORMANCE MATERIALS INC.

(Exact name of registrant as specified in its charter)

Delaware

20-5748297

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

260 Hudson River Road

Waterford, NY 12188

(518) 233-3370

(Address of principal executive offices including zip code)

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

x

Smaller Reporting Company

o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

The number of shares of common stock of the Company, par value $0.01 per share, outstanding as of the close of business on November 7, 2014, was 48 shares, all of which were held by MPM Intermediate Holdings Inc.

Based in Waterford, New York, Momentive Performance Materials Inc. (the “Company” or “MPM”), is comprised of two businesses: Silicones and Quartz. Silicones is a global business engaged in the manufacture, sale and distribution of silanes, specialty silicones and urethane additives. Quartz, also a global business, is engaged in the manufacture, sale and distribution of high-purity fused quartz and ceramic materials.

As a result of the Company’s reorganization and emergence from Chapter 11 bankruptcy on October 24, 2014, the Company’s direct parent is MPM Intermediate Holdings Inc., a holding company and wholly owned subsidiary of MPM Holdings Inc., the ultimate parent entity of MPM (“New MPM Holdings”). Prior to its reorganization, the Company, through a series of intermediate holding companies, was controlled by investment funds managed by affiliates of Apollo Management Holdings, L.P. (together with Apollo Global Management, LLC and subsidiaries, “Apollo”).

The unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its majority-owned subsidiaries in which minority shareholders hold no substantive participating rights and variable interest entities (“VIEs”) in which the Company is the primary beneficiary. Intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair statement have been included. Results for the interim periods are not necessarily indicative of results for the entire year.

Year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the accompanying notes included in the Company’s most recent Annual Report on Form 10-K.

Going Concern

At September 30, 2014, prior to its emergence from Chapter 11, the Company believed that, under its current capital structure, there was significant doubt about its ability to continue as a going concern for the next 12 months. The unaudited Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern. The Company’s ability to continue as a going concern was contingent upon the Company’s ability to comply with the financial and other covenants contained in the DIP Facilities (see Note 2) and the Company’s ability to successfully implement the Plan (see Note 2), among other factors.

The unaudited Condensed Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of recorded assets, the satisfaction and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the Bankruptcy Filing (see Note 2).

2. Chapter 11 Bankruptcy Filing

Bankruptcy Filing

On April 13, 2014 (the “Petition Date”), Momentive Performance Materials Holdings Inc. (the Company’s direct parent prior to October 24, 2014) (“Old MPM Holdings”), the Company and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization (the “Bankruptcy Filing”) under Chapter 11 (“Chapter 11”) of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Court”). The Chapter 11 proceedings are being jointly administered under the caption In re MPM Silicones, LLC, et al., Case No. 14-22503. The Debtors continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court through the Effective Date (defined below).

Subsequent to the Petition Date, the Company received approval from the Court to pay or otherwise honor certain pre-petition obligations generally designed to stabilize the Company’s operations, such as certain employee wages, salaries and benefits, certain taxes and fees, certain customer obligations, obligations to certain logistics providers and pre-petition amounts owed to certain critical vendors. The Company has also honored payments to vendors and other providers in the ordinary course of business for goods and services received after the Petition Date. The Company has retained legal, financial and tax professionals to advise the Company in connection with the Bankruptcy Filing and certain other professionals to provide services and advice in the ordinary course of business.

In connection with the Bankruptcy Filing, on April 15, 2014, the Debtors entered into an amended and restated senior secured debtor-in-possession and exit asset-based revolving credit agreement (the “DIP ABL Facility”), which amended and restated the Company’s existing asset-based revolving loan facility (the “ABL Facility”).

The DIP ABL Facility was terminated upon consummation of the Plan by the Company on October 24, 2014, at which time the Company exercised its option to convert the DIP ABL Facility into an exit asset-based revolving facility (the “Exit ABL Facility”).

Prior to its termination, the DIP ABL Facility had a 12 month term unless, prior to the end of such 12 month period, a reorganization plan was confirmed pursuant to an order entered by the Court and subsequently consummated, in which case, the DIP ABL Facility would terminate on the date of such consummation, unless the Company exercised its option to convert the DIP ABL Facility into the Exit ABL Facility, in which case, upon the effectiveness of the Exit ABL Facility, the term would be five years after such effective date. The maximum availability under the DIP ABL Facility was $270. The DIP ABL Facility was also subject to a borrowing base that was based on a specified percentage of eligible accounts receivable and inventory and, in certain foreign jurisdictions, machinery and equipment.

The DIP ABL Facility bore interest based on, at the Company’s option, an adjusted LIBOR rate plus an applicable margin of 2.75% or an alternate base rate plus an applicable margin of 1.75%. In addition to paying interest on outstanding principal under the DIP ABL Facility, the Company was required to pay a commitment fee to the lenders in respect of the unutilized commitments at an initial rate equal to 0.375% per annum, subject to adjustment depending on the usage. The DIP ABL Facility had a minimum EBITDA covenant calculated on a cumulative basis beginning with May 1, 2014 and tested monthly commencing as of August 31, 2014 and a minimum liquidity covenant of $50 tested at the close of each business day. The Exit ABL Facility does not have any financial maintenance covenants, other than a minimum fixed charge coverage ratio of 1.0 to 1.0 that would only apply if availability is less than the greater of (a) 12.5% of the lesser of the borrowing base and the total Exit ABL Facility commitments at such time and (b) $27. The fixed charge coverage ratio under the agreement governing the Exit ABL Facility is defined as the ratio of (a) Adjusted EBITDA minus non-financed capital expenditures and cash taxes to (b) debt service plus cash interest expense plus certain restricted payments, each measured on a last twelve months basis.

The DIP ABL Facility was secured by, among other things, first-priority liens on most of the inventory and accounts receivable and related assets of the Company, its domestic subsidiaries and certain of its foreign subsidiaries, and, in the case of certain foreign subsidiaries, machinery and equipment (the “DIP ABL Priority Collateral”), and second-priority liens on certain collateral that generally included most of the Company’s, its domestic subsidiaries’ and certain of its foreign subsidiaries’ assets other than DIP ABL Priority Collateral (the “DIP Term Loan Priority Collateral”), in each case subject to certain exceptions and permitted liens.

As of September 30, 2014, $63 was outstanding under the DIP ABL Facility.

DIP Term Loan Facility

In connection with the Bankruptcy Filing, on April 15, 2014, the Company entered into a senior secured debtor-in-possession term loan agreement, as amended (the “DIP Term Loan Facility”) (collectively with the DIP ABL Facility, the “DIP Facilities”). The DIP Term Loan Facility was used in part to repay in full the outstanding obligations under the Company’s existing ABL Facility.

The DIP Term Loan Facility was terminated upon consummation of the Plan by the Company on October 24, 2014. All amounts outstanding under the DIP Term Loan Facility as of such date were repaid in full.

Prior to its termination, the DIP Term Loan Facility had a 12 month term unless, prior to the end of such 12 month period, a reorganization plan was confirmed pursuant to an order entered by the Court and subsequently consummated, in which case, the DIP Term Loan Facility would terminate on the date of such consummation. The amount committed and made available under the DIP Term Loan Facility was $300. The DIP Term Loan Facility bore interest based on, at the Company’s option, an adjusted LIBOR rate plus an applicable margin of 3.25% or an alternate base rate plus an applicable margin of 2.25%.

Like the DIP ABL Facility, the DIP Term Loan Facility had a minimum EBITDA covenant calculated on a cumulative basis beginning with May 1, 2014 and tested monthly commencing as of August 31, 2014 and a minimum liquidity covenant of $50 tested at the close of each business day.

The security arrangements for the DIP Term Loan Facility included first-priority liens on the DIP Term Loan Priority Collateral owned by the Company and its domestic subsidiaries and second-priority liens on the DIP ABL Priority Collateral owned by the Company and its domestic subsidiaries, which were junior to the DIP ABL Facility, in each case subject to certain exceptions and permitted liens.

As of September 30, 2014, $300 was outstanding under the DIP Term Loan Facility.

In order for the Company to emerge successfully from Chapter 11, it needed to obtain the Court’s confirmation of a Chapter 11 plan of reorganization proposed by the Debtors (as amended, supplemented or modified, the “Plan”), which has enabled the Company to transition from Chapter 11 into ordinary course operations outside of bankruptcy.

On June 23, 2014, the Company filed with the Court an amended version of the Plan (as further amended on September 24, 2014) and accompanying disclosure statement (the “Disclosure Statement”), both of which were originally filed with the Court on May 12, 2014. The Plan provided, among other things, mechanisms for settlement of claims against the Debtors’ estates, treatment of the Company’s existing equity and debt holders, and certain corporate governance and administrative matters pertaining to the reorganized Company, each consistent with the terms set forth in the Support Agreement (defined below) which are further described below. The Plan was intended to enable the Debtors to continue business operations without the likelihood of need for further financial reorganization.

On June 23, 2014, the Court issued an order (the “Disclosure Statement Order”) (a) approving the Disclosure Statement; (b) establishing August 18, 2014 as the date of commencement of the hearing to approve the Plan (the “Confirmation Hearing”); (c) establishing the procedures for solicitation and tabulation to accept or reject the Plan, including setting July 28, 2014 as the voting deadline (the “Voting Deadline”); (d) establishing the deadline, July 28, 2014, and the procedures for filing objections to confirmation of the Plan; (e) approving the rights offering procedures (see Restructuring Support Agreement below) and (f) granting related relief necessary to the Company to implement the order.

Pursuant to the Disclosure Statement Order, the Voting Deadline has passed. Pursuant to the Plan, only four classes of holders of claims against the Debtors were entitled to vote to accept or reject the Plan. Two classes of holders of claims (including holders of the Springing Lien Notes) voted unanimously to approve the Plan whereas two classes of holders of claims voted to reject the Plan (including holders of the First Lien Notes and the Senior Secured Notes). The two classes of holders of claims that rejected the Plan received, pursuant to the Plan, certain replacement notes in satisfaction of their claims against the Debtors (see Note 9). Four of the remaining classes of holders of claims against the Debtors are unimpaired by the Plan and thus deemed to have accepted the Plan. In addition, three classes of holders of claims will not receive any distributions under the Plan and are deemed to have rejected the Plan. Despite the rejection or deemed rejection of the Plan by certain classes of holders of claims, the Bankruptcy Code provided for the Plan to be approved if it met certain requirements.

Restructuring Support Agreement

In connection with the Bankruptcy Filing, the Debtors entered into a Restructuring Support Agreement, dated as of April 13, 2014, (as amended, supplemented or otherwise modified, the “Support Agreement”), among the Debtors, certain affiliates of Apollo Global Management, LLC (the “Apollo Entities”) and certain holders of the Company’s 9.0% Second-Priority Springing Lien Notes due 2021 and 9.5% Second-Priority Springing Lien Notes due 2021 (collectively, the “Second Lien Notes”) that are not Apollo Entities (the “Consenting Noteholders” and, together with the Apollo Entities, the “Plan Support Parties”) providing that the Plan Support Parties, which held approximately 90% in dollar amount of the Second Lien Notes, would support, and vote in favor of the Plan.

Pursuant to the terms of the Support Agreement, the Plan Support Parties were required to not only vote in favor of the Plan, but were also prohibited, from among other things, opposing confirmation of the Plan. The Debtors, in turn, agreed to propose the Plan which provides for (a) payment in full in cash to the Debtors’ general unsecured trade creditors and holders of claims arising from the Company’s $75 revolving credit facility, (b) either payment in full in cash or by delivery of replacement notes to holders of 8.875% First-Priority Senior Secured Notes due 2020 and 10% Senior Secured Notes due 2020, (c) conversion of the Second Lien Notes into the new equity of the reorganized Debtors (subject to dilution by a management incentive plan and the new equity to be issued by the rights offerings described below), (d) subscription rights to holders of Second Lien Notes in the $600 rights offerings (the “Rights Offerings”), giving such holders the opportunity to purchase a percentage of the new equity of the reorganized Debtors at a price per share determined by using the pro forma capital structure and an enterprise value of $2.2 billion and applying a 15% discount to the equity value thereto, (e) a recovery to holders of the 11% Senior Discount Note, due June 4, 2017 of Old MPM Holdings in the amount of the cash available at Old MPM Holdings as of the effective date of the Plan, after taking into account administrative expenses, and (f) no recovery to the holders of 11 1⁄2% Senior Subordinated Notes due 2016 (the “Senior Subordinated Notes”) on account of the subordination provisions set forth in the indenture governing the Senior Subordinated Notes. The Plan also provided that the reorganized Debtors will select a chief executive officer, chief financial officer and general counsel who are acceptable to the Requisite Investors (as defined in the Support Agreement) and the costs for whom will not be shared with Momentive Specialty Chemicals Inc. (“MSC”), an affiliate, under the Shared Services Agreement between the Company and MSC. Under the Plan, the Shared Services Agreement was amended to, among other things, (i) exclude the services of certain executive officers, (ii) provide for a transition assistance period at the election of the recipient following termination of the Shared Services Agreement of up to 12 months, subject to one successive renewal period of an additional 60 days and (iii) provide for the use of an independent third-party audit firm to assist the Steering Committee with its annual review of billings and allocations.

On June 23, 2014, the Court found that the terms and conditions of the Support Agreement were fair, reasonable and the best available to the Debtors under the circumstances and issued an order authorizing and directing the Debtors to assume the Support Agreement.

On September 11, 2014, the Court entered an order (the “Confirmation Order”) confirming the Plan, and on October 24, 2014, the Debtors successfully emerged from Chapter 11 bankruptcy.

On May 9, 2014, the Company entered into the Backstop Commitment Agreement, as subsequently amended (the “BCA”), among the Company, Old MPM Holdings, and the commitment parties party thereto (the “Commitment Parties,” and each individually, a “Commitment Party”). The BCA provided that upon the satisfaction of certain terms and conditions, including the confirmation of the Plan, the Company would have the option to require each Commitment Party to purchase from the Company (on a several and not joint basis) its pro rata portion, based on such Commitment Party’s backstop commitment percentage, of the common stock of the reorganized Company (the “New Common Stock”) that is not otherwise purchased in connection with the Rights Offerings which were made in connection with the Plan (the “Unsubscribed Shares”). In consideration for their commitment to purchase the Unsubscribed Shares, the Commitment Parties received a commitment premium equal to $30 (the “BCA Commitment Premium”). The BCA Commitment Premium was payable in shares of New Common Stock; provided, that, if the BCA was terminated under certain circumstances, the BCA Commitment Premium would have been payable in cash. Pursuant to the terms of the BCA, the BCA Commitment Premium was deemed earned, nonrefundable and non-avoidable upon entry of the approval order by the Court. The Company has recognized a $30 liability for the BCA Commitment Premium as of September 30, 2014 under the guidance for accounting for liability instruments. This amount is included in “Reorganization items, net” in the unaudited Condensed Consolidated Statements of Operations and “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets. The Company has agreed to reimburse the Commitment Parties for all reasonable fees and expenses incurred in connection with, among other things, the negotiation, preparation and implementation of the Rights Offerings, the Plan and any related efforts. In addition, the BCA requires that the Company and the other Debtors indemnify the Commitment Parties for certain losses, claims, damages, liabilities, costs and expenses arising out of or in connection with the BCA, the Plan and the related transactions. On June 23, 2014, the Court found that the terms and conditions of the Support Agreement were fair, reasonable and the best available to the Debtors under the circumstances, and issued an order authorizing and directing the Debtors to enter into, execute, deliver and implement the BCA.

Upon application of fresh-start accounting (see Note 3), on October 24, 2014, the BCA Commitment Premium will be converted to equity in the unaudited Condensed Consolidated Balance Sheets.

Pre-Petition Claims

On June 4, 2014, the Debtors filed schedules of assets and liabilities and statements of financial affairs with the Court, which were amended on July 15, 2014. On June 6, 2014, the Court entered an order establishing July 17, 2014 as the bar date for potential non-governmental creditors and October 10, 2014 for governmental creditors to file proofs of claims and establishing the required procedures with respect to filing such claims. A bar date is the date by which pre-petition claims against the Debtors must be filed if the claimants wish to receive any distribution in the Chapter 11 proceedings.

Pre-petition claims will be disposed of in accordance with the Plan. As the Company had not emerged from Chapter 11 bankruptcy as of September 30, 2014, all such amounts are classified as “Liabilities subject to compromise” in the unaudited Condensed Consolidated Balance Sheets.

Subsequent Events

Emergence from Chapter 11 Bankruptcy

On October 24, 2014 (the “Effective Date”), the Plan became effective and the Debtors emerged from the Chapter 11 proceedings.

On or following the Effective Date, and pursuant to the terms of the Plan, the following occurred or is in the process of occurring:

•

payment in full in cash to general unsecured creditors (including trade creditors) and holders of claims arising from the Cash Flow Facility and the DIP Term Loan Facility;

•

payment in full by way of replacement notes to holders of the First Lien Notes and the Senior Secured Notes;

•

conversion of the Springing Lien Notes into the new equity of the post-Effective Date Company (the “Successor Company”) (resulting in the issuance of 11,791,126 shares of New Common Stock) (the “Second Lien Notes Equity Distribution”), subject to dilution by the management incentive plan and the Rights Offerings Stock;

•

subscription rights to holders of the Springing Lien Notes in the Rights Offerings (resulting in the issuance of 36,197,874 shares of New Common Stock (including shares issued in connection with the Backstop Commitment));

•

a recovery to the holders of Old MPM Holdings’ PIK notes in the amount of the cash available at Old MPM Holdings as of the Effective Date, after taking into account administrative expenses;

•

cancellation of the Senior Subordinated Notes on account of the subordination provisions set forth in the indenture to the Senior Subordinated Notes;

•

cancellation of the equity of the pre-Effective Date Company (the “Predecessor Company”);

•

entry into the $270 Exit ABL Facility (see Note 9); and

•

appointment of a new chief executive officer, chief financial officer and general counsel.

On the Effective Date, all previously issued and outstanding shares of the Company’s common stock were canceled, as were all other previously issued and outstanding equity interests. On the Effective Date, the Company issued 7,475,000 shares (the “1145 Rights Offering Stock”) of a new class of common stock, par value $0.01 per share, of the Company (the “New Common Stock”) pursuant to the rights offering under Section 1145 of the Bankruptcy Code (the “Section 1145 Rights Offering”) and 26,662,690 shares (the “4(a)(2) Rights Offering Stock”) of New Common Stock pursuant to the rights offering under section 4(a)(2) (the “4(a)(2) Rights Offering”) of the Securities Act of 1933, as amended (the “Securities Act). Additionally, the Company issued 2,060,184 shares of New Common Stock pursuant to the Backstop Commitment, including 1,475,652 shares of New Common Stock issued as consideration for the BCA Commitment Premium. A portion of the 1145 Rights Offering Stock issued to the Commitment Parties, and all of the 4(a)(2) Rights Offering Stock, are restricted securities under the Securities Act, and may not be offered, sold or otherwise transferred except in accordance with applicable restrictions. In addition, upon effectiveness of the Plan, the Company issued 11,791,126 shares of New Common Stock to holders of the Second Lien Notes pursuant to the Second Lien Notes Equity Distribution.

In accordance with the Plan, all shares of New Common Stock were automatically exchanged for one share of common stock, par value $0.01 per share, of New MPM Holdings, which contributed the shares of New Common Stock to its wholly-owned subsidiary, MPM Intermediate Holdings Inc. As a result, the Company is a wholly owned subsidiary of MPM Intermediate Holdings Inc.

The shares of New Common Stock described above were exempt from registration under the Securities Act pursuant to (i) Section 1145 of the Bankruptcy Code, which generally exempts from such registration requirements the issuance of securities under a plan of reorganization, and/or (ii) Section 4(a)(2) of the Securities Act because the issuance did not involve any public offering.

On November 7, 2014, the Company effected a reverse stock split and, as a result, 48 shares of the New Common Stock remained outstanding.

3. Fresh Start Accounting Subsequent Event

In connection with the Company’s emergence from Chapter 11, the Company will apply the provisions of fresh start accounting to its financial statements as (i) the holders of existing voting shares of the Predecessor Company received less than 50% of the voting shares of the emerging entity and (ii) the reorganization value of the Company’s assets immediately prior to confirmation was less than the post-petition liabilities and allowed claims. The Company will apply fresh start accounting as of October 24, 2014.

Upon the application of fresh start accounting, the Company will allocate the reorganization value to its individual assets based on their estimated fair values. Reorganization value represents the fair value of the Successor Company’s assets before considering liabilities. The excess reorganization value over the the fair value of identified tangible and intangible assets will be reported as goodwill.

Reorganization Value

In support of the Plan, the enterprise value of the Successor Company was estimated to be in the range of $2.0 billion to $2.4 billion as of the Effective Date. Based on the estimates and assumptions used in determining the enterprise value, as further discussed below, the Company estimated the enterprise value to be $2.2 billion, which was approved by the Court.

The Company estimated the enterprise value of the Successor Company utilizing the discounted cash flow method. To estimate fair value utilizing the discounted cash flow method, the Company established an estimate of future cash flows based on the financial projections and assumptions utilized in the Company’s disclosure statement, which were derived from earnings forecasts and assumptions regarding growth and margin projections. A terminal value was included, and was calculated using the constant growth method based on the projected cash flows of the final year of the forecast period.

Pro Forma Consolidated Statement of Financial Position

The pro forma adjustments set forth in the following consolidated Balance Sheet reflect the preliminary estimated effect of the consummation of the transactions contemplated by the Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result of the adoption of fresh-start accounting (reflected in the column “Fresh Start Adjustments”) on the Company’s unaudited Condensed Consolidated Balance Sheet as of September 30, 2014, had the Plan been effective on that date.

The Reorganization Adjustments reflect the estimated effect of the consummation of the transactions contemplated by the Plan, including the settlement of various liabilities, issuance of securities, repayment of certain debt and other cash payments. These adjustments reflect preliminary estimates, and actual amounts to be recorded as of the Effective Date may be materially different from these estimates.

The Fresh Start Adjustments are based upon asset appraisals which are preliminary and subject to change. As a result, changes in values and assumptions from those reflected below may materially affect the reported value of assets and liabilities, as well as goodwill. Additionally, amounts will differ due to the results of operations between September 30, 2014 and the Effective Date.

The pro forma effects of the consummation of the Plan and fresh-start accounting on the Company’s unaudited Condensed Consolidated Balance Sheet as of September 30, 2014 are as follows:

Predecessor Company

Reorganization Adjustments (1)

Fresh Start Adjustments (2)

Successor Company

Assets

Current assets:

Cash and cash equivalents

$

139

$

120

$

—

$

259

Accounts receivable

340

—

—

340

Inventories

429

—

9

438

Deferred income taxes

5

75

(3

)

77

Other current assets

76

—

—

76

Total current assets

989

195

6

1,190

Investment in unconsolidated entities

10

—

8

18

Deferred income taxes

3

25

14

42

Other long-term assets

24

3

—

27

Property and equipment, net

872

—

246

1,118

Goodwill

362

—

(73

)

289

Other intangible assets, net

404

—

11

415

Total assets

$

2,664

$

223

$

212

$

3,099

Liabilities and Deficit

Current liabilities:

Accounts payable

$

222

$

38

$

—

$

260

Debt payable within one year

1,770

(1,733

)

—

37

Interest payable

59

(58

)

—

1

Income taxes payable

6

—

—

6

Deferred income taxes

13

—

—

13

Accrued payroll and incentive compensation

44

12

—

56

Other current liabilities

96

(25

)

—

71

Total current liabilities

2,210

(1,766

)

—

444

Long-term liabilities:

Long-term debt

7

1,159

—

1,166

Pension and post employment benefit obligations

134

164

45

343

Deferred income taxes

63

(65

)

190

188

Other long-term liabilities

51

8

11

70

Liabilities subject to compromise

2,026

(2,026

)

—

—

Total liabilities

4,491

(2,526

)

246

2,211

(Deficit) Equity

Common stock (Successor)

—

—

—

—

Additional paid-in capital (Successor)

—

888

—

888

Common stock (Predecessor)

—

—

—

—

Additional paid-in capital (Predecessor)

713

(713

)

—

—

Accumulated other comprehensive income

219

—

(219

)

—

Accumulated deficit

(2,759

)

2,574

185

—

Total (deficit) equity

(1,827

)

2,749

(34

)

888

Total liabilities and (deficit) equity

$

2,664

$

223

$

212

$

3,099

(1)

Reflects adjustments related to the consummation of the Plan, including the settlement of liabilities subject to compromise and related payments, other distributions of cash, issuance of new shares of common stock and the cancellation of the common equity of the Predecessor Company, as discussed in Note 2.

(2)

Reflects adjustments related to fresh-start accounting, including the write-up of inventory and the adjustment of property, plant and equipment to its appraised fair value. Adjustments for other intangible assets and deficit are also included and are based on third party valuations performed by certain valuation specialists. The fresh-start adjustments also include the elimination of the accumulated deficit and accumulated other comprehensive income of the Predecessor Company. These adjustments reflect preliminary estimates, and actual amounts to be recorded as of the Effective Date may be materially different from these estimates.

The reorganization value of each of our reporting units was allocated to the individual assets and liabilities based upon their estimated fair market values. Allocations were first made to current assets and liabilities and long-term monetary assets and liabilities. The remainder of the reorganization value was allocated to long-term assets such as property, plant and equipment, equity method investments and intangible assets. The excess of reorganization value over the estimated fair value of the Company’s assets is estimated to be $289, and is reflected as goodwill.

Liabilities subject to compromise represent unsecured liabilities that have been accounted for under the Company’s Plan. As a result of the Bankruptcy Filing, actions to enforce or otherwise effect payment of pre-petition liabilities are generally stayed. These liabilities represent the amounts which have been allowed on known claims which were resolved through the Chapter 11 process, and have been approved by the Court as a result of the Confirmation Order.

Subsequent to the Petition Date, the Company received approval from the Court to pay or otherwise honor certain pre-petition obligations generally designed to stabilize the Company’s operations, such as certain employee wages, salaries and benefits, certain taxes and fees, customer obligations, obligations to logistics providers and pre-petition amounts owed to certain critical vendors. The Company has honored payments to vendors and other providers in the ordinary course of business for goods and services received after the Petition Date.

The following table summarizes pre-petition liabilities that are classified as “Liabilities subject to compromise” in the unaudited Condensed Consolidated Balance Sheets:

As of September 30, 2014

Accounts payable

$

65

Debt

1,727

Interest payable

46

Pension and other post employment benefit obligations

163

Other

25

Total

$

2,026

The Bankruptcy Filing was an event of default under the ABL Facility, the Cash Flow Facility and the indentures that govern the Company’s notes (see Note 9). Interest payable reflects pre-petition accrued interest related to the Debtor’s unsecured debt. Other liabilities subject to compromise primarily include accrued liabilities for incentive compensation, environmental and legal items.

These liabilities were disposed of in accordance with the Plan, as applicable, on or shortly after the Company emerged from Chapter 11 bankruptcy on October 24, 2014.

5. Reorganization Items, Net

Incremental costs incurred directly as a result of the Bankruptcy Filing and adjustments to the expected amount of allowed claims for liabilities subject to compromise are classified as “Reorganization items, net” in the unaudited Condensed Consolidated Statements of Operations. The following table summarizes reorganization items, net for the three and nine months ended September 30, 2014:

Three Months Ended September 30, 2014

Nine Months Ended September 30, 2014

Professional fees

$

41

$

62

DIP Facility financing costs

—

19

BCA Commitment Premium

—

30

Other

3

3

Total

$

44

$

114

6. Summary of Significant Accounting Policies

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and also requires the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, it requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Subsequent Events—The Company has evaluated events and transactions subsequent to September 30, 2014 through November 14, 2014, the date of issuance of its unaudited Condensed Consolidated Financial Statements.

In May, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Board Update No. 2014-09: Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the existing revenue recognition guidance and most industry-specific guidance applicable to revenue recognition. According to the new guidance, an entity will apply a principles-based five step model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period and early application is not permitted. The Company is currently assessing the potential impact of ASU 2014-09 on its financial statements.

In August 2014, the FASB issued Accounting Standards Board Update No. 2014-15: Presentation of Financial Statements - Going Concern - Disclosures of Uncertainties about an entity's Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The requirements of ASU 2014-15 are not expected to have a significant impact on the Company’s financial statements.

7. Related Party Transactions

Administrative Services, Management and Consulting Agreement

The Company was subject to a management consulting and advisory services agreement with Apollo and its affiliates for the provision of management and advisory services for an initial term of up to twelve years. The Company had also agreed to indemnify Apollo and its affiliates and their directors, officers and representatives for potential losses relating to the services contemplated under these agreements. Terms of the agreement provided for annual fees of $4 plus out of pocket expenses, payable in one lump sum annually, and provided for a lump-sum settlement equal to the net present value of the remaining annual management fees payable under the remaining term of the agreement in connection with a sale or initial public offering by the Company. This annual management fee was waived for 2014.

In connection with the Company’s emergence from Chapter 11, the management agreement was terminated pursuant to the Confirmation Order, effective as of the Petition Date.

Transactions with MSC

Shared Services Agreement

On October 1, 2010, the Company entered into a shared services agreement with MSC (which, from October 1, 2010 through October 24, 2014, was a subsidiary under a common parent) (the “Shared Services Agreement”). Under this agreement, the Company provides to MSC, and MSC provides to the Company, certain services, including, but not limited to, executive and senior management, administrative support, human resources, information technology support, accounting, finance, technology development, legal and procurement services. The Shared Services Agreement is subject to termination by either the Company or MSC, without cause, on not less than 30 days’ written notice, and expires in October 2015 (subject to one-year renewals every year thereafter; absent contrary notice from either party). The Shared Services Agreement establishes certain criteria upon which the costs of such services are allocated between the Company and MSC. Pursuant to this agreement, during the nine months ended September 30, 2014 and 2013, the Company incurred approximately $76 and $67, respectively, of net costs for shared services and MSC incurred approximately $100 and $90, respectively, of net costs for shared services. Included in the net costs incurred during the nine months ended September 30, 2014 and 2013, were net billings from MSC to the Company of $31 and $21, respectively, to bring the percentage of total net incurred costs for shared services under the Shared Services Agreement to the applicable allocation percentage. The allocation percentage for 2014 remains unchanged from 2013, which was 57% for MSC and 43% for the Company. The Company had accounts receivable from MSC of less than $1 as of December 31, 2013, and accounts payable to MSC of $14 and $4 at September 30, 2014 and December 31, 2013, respectively.

In conjunction with the consummation of the Plan, the Shared Services Agreement was amended to, among other things, (i) exclude the services of certain executive officers, (ii) provide for a transition assistance period at the election of the recipient following termination of the Shared Services Agreement of up to 12 months, subject to one successive renewal period of an additional 60 days and (iii) provide for the use of an independent third-party audit firm to assist the Steering Committee with its annual review of billings and allocations.

Purchases and Sales of Products and Services with MSC

The Company also sells products to, and purchases products from MSC, pursuant to a Master Buy/Sell Agreement dated as of September 6, 2012 (the “Master Buy/Sell Agreement”). Prices under the agreement are determined by a formula based upon certain third party sales of the applicable product, or in the event that no qualifying third party sales have taken place, based upon the average contribution margin generated by certain third party sales of products in the same or a similar industry. The standard terms and conditions of the seller in the applicable jurisdiction apply to transactions under the Master Buy/Sell Agreement. A subsidiary of the Company also acts as a non-exclusive distributor in India for certain of MSC’s subsidiaries pursuant to Distribution Agreements dated as of September 6, 2012 (the “Distribution Agreements”). Prices under the Distribution Agreements are determined by a formula based on the weighted average sales price of the applicable product less

a margin. The Master Buy/Sell Agreement and Distribution Agreements have initial terms of three years and may be terminated for convenience by either party thereunder upon 30 days’ prior notice in the case of the Master/Buy Sell Agreement and upon 90 days’ prior notice in the case of the Distribution Agreements. Pursuant to these agreements and other purchase orders, during the three months endedSeptember 30, 2014 and 2013, the Company sold $2 of products to MSC and purchased less than $1 and $1, respectively. During the nine months ended September 30, 2014 and 2013, the Company sold $6 and $4, respectively, of products to MSC and purchased less than $1 and $1, respectively. As of both September 30, 2014 and December 31, 2013, the Company had $1 of accounts receivable from MSC and less than $1 of accounts payable to MSC related to these agreements.

Other Transactions with MSC

In March 2014, the Company entered into a ground lease with a Brazilian subsidiary of MSC to lease a portion of the Company’s manufacturing site in Itatiba, Brazil, where the subsidiary of MSC will construct and operate an epoxy production facility. In conjunction with the ground lease, the Company also entered into a site services agreement whereby it will provide to the subsidiary of MSC various services such as environmental, health and safety, security, maintenance and accounting, amongst others, to support the operation of this new facility. The Company received less than $1 from MSC under this agreement during both the three and nine months ended September 30, 2014.

In April 2014, the Company sold 100% of its interest in its Canadian subsidiary to a subsidiary of MSC for a purchase price of $12. As a part of the transaction the Company also entered into a non-exclusive distribution agreement with a subsidiary of MSC, whereby the subsidiary of MSC will act as a distributor of certain of the Company’s products in Canada. The agreement has a term of 10 years, and is cancelable by either party with 180 days’ notice. The Company compensates the subsidiary of MSC for acting as distributor at a rate of 2% of the net selling price of the related products sold. During the three and nine months endedSeptember 30, 2014, the Company sold approximately $10 and $20, respectively, of products to MSC under this distribution agreement, and paid less than $1 to MSC as compensation for acting as distributor of the products. As of September 30, 2014, the Company had $3 of accounts receivable from MSC related to the distribution agreement.

As both the Company and MSC shared a common ultimate parent at the time of the transaction, this sale was accounted for as a transaction under common control, as defined in the accounting guidance for business combinations. As such, the loss on the sale of $3 was accounted for as a capital distribution, and is reflected in “Paid-in-Capital” in the unaudited Condensed Consolidated Balance Sheets.

Transactions with Affiliates Other Than MSC

Purchases and Sales of Products and Services

The Company sells products to various affiliates other than MSC. These sales were $3 and $2 for the three months endedSeptember 30, 2014 and 2013, respectively, and $9 and $7 for the nine months ended September 30, 2014 and 2013, respectively. Receivables from these affiliates were $2 and $1 at September 30, 2014 and December 31, 2013, respectively. The Company also purchases products and services from various affiliates other than MSC. These purchases were $5 and $4 the three months endedSeptember 30, 2014 and 2013, respectively, and $12 and $13 for the nine months ended September 30, 2014 and 2013, respectively. The Company had accounts payable to these affiliates of $1 and $2 as of September 30, 2014 and December 31, 2013, respectively.

ASM Off-Take Agreement

Through May 17, 2013, the Company was a party to an (i) off-take agreement (the “Old Off-Take Agreement”) with Asia Silicones Monomer Limited (“ASM”), which was 50% owned by GE Monomer (Holdings) Pte Ltd. up until such date, and (ii) a long-term supply agreement with General Electric Company (“GE”) and GE Monomer (Holdings) Pte. Ltd. (the “Old GE Supply Agreement”), which was entered into at the closing of the GE Advanced Materials Acquisition. Under the Old Off-Take Agreement, ASM was obligated to provide siloxane and certain related products to the Company through 2014 (or until certain ASM financing obligations were satisfied). Under the Old GE Supply Agreement, GE and GE Monomer (Holdings) Pte. Ltd. agreed to ensure the Company a minimum annual supply of siloxane and certain related products from ASM or an alternative source in certain circumstances through December 2026. Under the Old Off-Take Agreement, the Company purchased approximately $35 of siloxane and certain related products from ASM for the nine months ended September 30, 2013. Subsequent to May 17, 2013, the Company continues to purchase siloxane and certain related products from ASM under a new agreement whereby ASM is not a considered a related party.

Revolving Credit Facility

In April 2013, the Company entered into a $75 revolving credit facility with an affiliate of GE (the “Cash Flow Facility”) (see Note 9). Prior to entry into the Cash Flow Facility, an affiliate of GE was one of the lenders under the Company’s prior senior secured revolving credit facility, representing approximately $160 of the lenders’ $300 revolving credit facility commitment. As of September 30, 2014, $20 was outstanding under the Cash Flow Facility.

Prior to June 30, 2014, Momentive Performance Materials Holdings LLC (the Company’s ultimate parent prior to October 24, 2014) (“Momentive Holdings”) purchased insurance policies which also covered the Company and MSC. Amounts were billed to the Company annually based on the Company’s relative share of the insurance premiums and amortized over the term of the policy. There were no billings to the Company for both the three and nine months ended September 30, 2014 and $9 for both the three and nine months ended September 30, 2013. The Company had accounts payable to Momentive Holdings of $3 under these arrangements at December 31, 2013.

In March 2014, the Company entered into an Employee Services Agreement with Momentive Holdings, MSC and Momentive Performance Materials Holdings Employee Corporation (“Employee Corp.”), a subsidiary of Momentive Holdings (the “Services Agreement”). The Services Agreement provides for the executive services of Mr. Jack Boss, an employee of Employee Corp., to be made available to the Company and sets forth the terms with respect to payment for the cost of such services. Mr. Boss was elected Executive Vice President and President, Silicones and Quartz Division of the Company effective March 31, 2014. Pursuant to the Services Agreement, the Company agrees to pay 100% of Mr. Boss’s costs of employment which are comprised of “Covered Costs” including an annual base salary of $585 thousand, a sign-on bonus of $1.3 payable between 2014 and 2015, annual incentive compensation, relocation costs, severance and benefits and other standard reasonable business expenses. The Company paid less than $1 under this agreement during both the three and nine months ended September 30, 2014.

In April 2014, the Company entered into an accounts receivable purchase and sale agreement with Superholdco Finance Corp (“Finco”), a newly formed subsidiary of Momentive Holdings. The agreement contains customary terms and conditions associated with such arrangements. On April 7, 2014, under this agreement, the Company sold approximately $51 of accounts receivable to Finco, and received 95% of the proceeds in cash, with the remaining 5% received in cash once the sold receivables were fully collected by Finco. The agreement also appointed the Company to act as the servicer of the receivables on behalf of Finco.

Finco was deemed to be a VIE, and the 5% holdback of cash by Finco represented the Company’s variable interest in Finco. The power to direct the activities that most significantly impact the VIE is shared between the Company and the other related party variable interest entity holder. The 5% holdback of cash by Finco previously resulted in the Company absorbing the majority of the risk from potential losses or the majority of the gains from potential returns of the VIE and, therefore, the Company had consolidated Finco in its unaudited Condensed Consolidated Financial Statements during a portion of the nine months ended September 30, 2014. As a result, the Company consolidated $50 of cash and cash equivalents and a $50 affiliated loan payable. During the three months ended September 30, 2014, the affiliated loan payable was repaid in full and the 5% holdback of cash was received from Finco. As such, as of September 30, 2014, the Company does not absorb the majority of risk from the potential losses or the majority of the gains from potential returns of the VIE, and therefore, as of September 30, 2014, the Company does not consolidate Finco.

8. Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy exists, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are:

Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date.

•

Level 3: Unobservable inputs, that are supported by little or no market activity and are developed based on the best information available in the circumstances. For example, inputs derived through extrapolation or interpolation that cannot be corroborated by observable market data.

Recurring Fair Value Measurements

At both September 30, 2014 and December 31, 2013, the Company had less than $1 of natural gas derivative contracts, which are measured using Level 2 inputs, and are included in “Other current assets” in the unaudited Condensed Consolidated Balance Sheets. The fair value of the natural gas derivative contracts generally reflects the estimated amounts that the Company would receive or pay, on a pre-tax basis, to terminate the contracts at the reporting date based on broker quotes for the same or similar instruments. Counterparties to these contracts are highly rated financial institutions, none of which experienced any significant downgrades that would reduce the fair value receivable amount owed, if any, to the Company. There were no transfers between Level 1, Level 2 or Level 3 measurements during the three or nine months ended September 30, 2014

The following table summarizes the carrying amount and fair value of the Company’s non-derivative financial instruments:

Carrying Amount

Fair Value

Level 1

Level 2

Level 3

Total

September 30, 2014

Debt

$

3,504

$

—

$

2,735

$

—

$

2,735

December 31, 2013

Debt

$

3,257

$

—

$

3,029

$

—

$

3,029

Fair values of debt classified as Level 2 are determined based on other similar financial instruments, or based upon interest rates that are currently available to the Company for the issuance of debt with similar terms and maturities. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities are considered reasonable estimates of their fair values due to the short-term maturity of these financial instruments.

9. Debt Obligations

As of September 30, 2014, the Company had $63 of outstanding borrowings under the DIP ABL Facility and $20 of outstanding borrowings under the Cash Flow Facility. The outstanding letters of credit under the DIP ABL Facility at September 30, 2014 were $74, leaving an unused borrowing capacity of $133.

Debt outstanding at September 30, 2014 and December 31, 2013 is as follows:

September 30, 2014

December 31, 2013

Liabilities Subject to Compromise

Long-Term

Due Within One Year

Long-Term

Due Within One Year

Senior Secured Credit Facilities:

ABL Facility

$

—

$

—

$

—

$

—

$

135

Cash Flow Facility

—

—

20

—

—

DIP Facilities:

DIP ABL Facility

—

—

63

—

—

DIP Term Loan Facility

—

—

300

—

—

First Lien and Senior Secured Notes:

8.875% First Lien Notes due 2020

—

—

1,100

—

1,100

10.00% Senior Secured Notes due 2020

—

—

250

—

250

Springing Lien Notes:

9.00% Springing Lien Dollar Notes due 2021

1,161

—

—

—

1,161

9.50% Springing Lien Euro Notes due 2021

184

—

—

—

183

Other Borrowings:

11.50% Senior Subordinated Notes due 2016

382

—

—

—

382

China bank loans

—

7

30

7

33

Other

—

—

7

—

6

Total debt

$

1,727

$

7

$

1,770

$

7

$

3,250

The Bankruptcy Filing, was an event of default under the ABL Facility, the Cash Flow Facility and the indentures that govern the Company’s notes. As such, all outstanding debt as of December 31, 2013 related to the ABL Facility, the Cash Flow Facility, the First Lien Notes, the Senior Secured Notes, the Springing Lien Notes and the Senior Subordinated Notes were classified as “Debt payable within one year” in the unaudited Condensed Consolidated Balance Sheets and related footnote disclosures. As of September 30, 2014, all outstanding debt related to the DIP Term Loan Facility, the Cash Flow Facility, the First Lien Notes and the Senior Secured Notes has been classified as “Debt payable within one year” in the unaudited Condensed Consolidated Balance Sheets, as these obligations are fully collateralized. As of September 30, 2014, all amounts related to the Debtor’s unsecured debt are classified in “Liabilities subject to compromise” in the unaudited Condensed Consolidated Balance Sheets. Additionally, as a result of the Bankruptcy Filing, the Company ceased accruing interest on the Debtor’s unsecured debt in April 2014.

In their opinion to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, the Company’s auditors, PricewaterhouseCoopers LLP, concluded that there was substantial doubt about the Company’s ability to continue as a going concern for the next 12 months. Additionally, the Company did not furnish its financial statements for the fiscal year ended December 31, 2013 to the lenders under the ABL Facility and Cash Flow Facility within the required time frame of 95 days from such fiscal year end. Both of these events, as well as the Bankruptcy Filing described in Note 2, triggered a violation of the covenants under the ABL Facility and Cash Flow Facility. The Company obtained waivers of these covenant violations from its lenders under the ABL Facility and Cash Flow Facility, which violations, if not waived or cured within a specified cure period, may have given rise to an acceleration under the ABL Facility and Cash Flow Facility and triggered cross-acceleration clauses under the indentures that govern the Company’s notes. Pursuant to such waivers, the lenders also agreed, subject to certain conditions and/or ongoing covenants and termination events, to waive any defaults or events of default arising under the ABL Facility or the Cash Flow Facility as a result of the commencement of a Chapter 11 filing.

The Bankruptcy Filing also constituted an event of default that accelerated the Company’s obligations under its First Lien Notes, Senior Secured Notes, Springing Lien Notes and Senior Subordinated Notes (collectively, the “Notes”). The Notes provide that as a result of the Bankruptcy Filing the principal and interest due thereunder shall be immediately due and payable; however, any efforts to enforce such payment obligations under the Notes are automatically stayed as a result of the Bankruptcy Filing and the creditors’ rights of enforcement in respect of the Notes are subject to the applicable provisions of the U.S. Bankruptcy Code.

Debtor-in-Possession Financing

DIP ABL Facility and Exit ABL Facility

In connection with the Bankruptcy Filing, in April 2014, Old MPM Holdings, the Company and certain of its subsidiaries entered into the DIP ABL Facility and the DIP Term Loan Facility, as further described in Note 2. During the nine months ended September 30, 2014, the Company borrowed $300 under the DIP Term Loan Facility, the proceeds of which were used in part to repay the outstanding balance under the ABL Facility.

Upon consummation of the Plan by the Company on October 24, 2014, the Company exercised its option to convert the DIP ABL Facility into an exit asset-based revolving facility (the “Exit ABL Facility”). The Exit ABL Facility has a five year term and a maximum availability of $270. The Exit ABL Facility is also subject to a borrowing base that is based on a specified percentage of eligible accounts receivable and inventory and, in certain foreign jurisdictions, machinery and equipment.

The Exit ABL Facility bears interest based on, at the Company’s option, (a) with respect to Tranche A Revolving Facility Commitments (as defined in the credit agreement governing the Exit ABL Facility), an adjusted LIBOR rate plus an applicable margin of 2.00% or an alternate base rate plus an applicable margin of 1.00% and (b) with respect to Tranche B Revolving Facility Commitments (as defined in the credit agreement governing the Exit ABL Facility), an adjusted LIBOR rate plus an applicable margin of 2.75% or an alternative base rate plus an applicable margin of 1.75%, in each case, subject to adjustment depending on usage. In addition to paying interest on outstanding principal under the Exit ABL Facility, the Company will be required to pay a commitment fee to the lenders in respect of the unutilized commitments at an initial rate equal to 0.375% per annum, subject to adjustment depending on the usage. The Exit ABL Facility does not have any financial maintenance covenants, other than a minimum fixed charge coverage ratio of 1.0 to 1.0 that only applies if availability is less than the greater of (a) 12.5% of the lesser of the borrowing base and the total Exit ABL Facility commitments at such time and (b) $27. The fixed charge coverage ratio under the agreement governing the Exit ABL Facility is defined as the ratio of (a) Adjusted EBITDA minus non-financed capital expenditures and cash taxes to (b) debt service plus cash interest expense plus certain restricted payments, each measured on a last twelve months basis.

The Exit ABL Facility is secured by, among other things, first-priority liens on most of the inventory and accounts receivable and related assets of the Company, its domestic subsidiaries and certain of its foreign subsidiaries, and, in the case of certain foreign subsidiaries, machinery and equipment (the “Exit ABL Priority Collateral”), and second-priority liens on certain collateral that generally includes most of the Company’s, its domestic subsidiaries’ and certain of its foreign subsidiaries’ assets other than Exit ABL Priority Collateral (the “DIP Term Loan Priority Collateral”), in each case subject to certain exceptions and permitted liens.

DIP Term Loan Facility

In connection with the Bankruptcy Filing, on April 15, 2014, the Company entered into a senior secured debtor-in-possession term loan agreement, as amended (the “DIP Term Loan Facility”) (collectively with the DIP ABL Facility, the “DIP Facilities”). Proceeds from the DIP Term Loan Facility were used in part to repay in full the outstanding obligations under the Company’s existing ABL Facility. The amount committed and made available under the DIP Term Loan Facility was $300. The DIP Term Loan Facility bore interest based on, at the Company’s option, an adjusted LIBOR rate plus an applicable margin of 3.25% or an alternate base rate plus an applicable margin of 2.25%. The DIP Term Loan Facility was terminated upon consummation of the Plan by the Company on October 24, 2014. All amounts outstanding under the DIP Term Loan Facility as of such date were repaid in full.

In connection with the consummation of the Plan, on October 24, 2014, the Company repaid in full all outstanding amounts under the Cash Flow Facility. Upon making these payments, the Company’s obligations under the Cash Flow Facility were satisfied in full and the Cash Flow Facility was immediately terminated.

New First Lien and Second Lien Notes

New First Lien Notes

Additionally, upon consummation of the Plan, on October 24, 2014, the Company issued $1,100 aggregate principal amount of 3.88% First-Priority Senior Secured Notes due 2021 (the “New First Lien Notes”). The New First Lien Notes were issued as replacement for the Company’s existing $1,100 outstanding principal amount of 8.875% First Lien Notes due 2020.

The New First Lien Notes are fully and unconditionally guaranteed on a senior secured basis by each of the Company’s existing U.S. subsidiaries that is a guarantor under the Company’s Exit ABL Facility and the Company’s future U.S. subsidiaries (other than receivables subsidiaries and U.S. subsidiaries of foreign subsidiaries) that guarantee any debt of the Company or any of the guarantor subsidiaries of the Company under the related indenture (the “Note Guarantors”). Pursuant to customary release provisions in the indenture governing the New First Lien Notes, the Note Guarantors may be released form their guarantee of the New First Lien Notes (the “New First Lien Note Guarantees”). The New First Lien Notes are not guaranteed by MPM Intermediate Holdings Inc.

The New First Lien Notes and New First Lien Note Guarantees are senior indebtedness of the Company and the Note Guarantors, respectively, and rank equal in right of payment with all existing and future senior indebtedness of the Company and the Note Guarantors, respectively; senior in right of payment to all existing and future subordinated indebtedness of the Company and the Note Guarantors and guarantees thereof; and structurally subordinated to all existing and future indebtedness and other liabilities of any of the Company’s subsidiaries that do not guarantee the New First Lien Notes.

The New First Lien Notes and New First Lien Note Guarantees have the benefit of first-priority liens on the collateral of the Company and the Note Guarantors other than the Exit ABL Priority Collateral, with respect to which the New First Lien Notes and New First Lien Note Guarantees have the benefit of second-priority liens. Consequently, the New First Lien Notes rank effectively junior in priority to the Company’s obligations under the Exit ABL Facility to the extent of the value of the Exit ABL Priority Collateral; equal with holders of other obligations secured pari passu with the New First Lien Notes including other first priority obligations (to the extent of the value of such collateral); effectively senior to any junior priority obligations (to the extent of the value of such collateral) including the New Second Lien Notes (further described below) and the Company’s obligations under the Exit ABL Facility to the extent of the value of the collateral that is not Exit ABL Priority Collateral; and effectively senior to any senior unsecured obligations (to the extent of the value of such collateral).

Interest on the New First Lien Notes is payable at 3.88% per annum, semiannually to holders of record at the close of business on April 1 or October 1 immediately preceding the interest payment date on April 15 and October 15 of each year, commencing on April 15, 2015. The Company may redeem some or all of the New First Lien Notes at any time at a redemption price of 100% of the principal amount plus accrued and unpaid interest.

New Second Lien Notes

Additionally, upon consummation of the Plan, on October 24, 2014, the Company issued $250 aggregate principal amount of 4.69% Second Lien Notes due 2022 (the “New Second Lien Notes”). The New Second Lien Notes were issued as replacement for the Company’s existing $250 outstanding principal amount of 10% Senior Secured Notes due 2020.

The New Second Lien Notes are fully and unconditionally guaranteed on a senior secured basis by each of the Company’s existing U.S. subsidiaries that is a guarantor under the Company’s Exit ABL Facility and the Company’s future U.S. subsidiaries (other than receivables subsidiaries and U.S. subsidiaries of foreign subsidiaries) that guarantee any debt of the Company or any Note Guarantor. Pursuant to customary release provisions in the indenture governing the New Second Lien Notes, the Note Guarantors may be released form their guarantee of the New Second Lien Notes (the “New Second Lien Note Guarantees”). The New Second Lien Notes are not guaranteed by MPM Intermediate Holdings Inc..

The New Second Lien Notes and New Second Lien Note Guarantees are senior indebtedness of the Company and the Note Guarantors, respectively, and rank equal in right of payment with all existing and future senior indebtedness of the Company and the Note Guarantors, respectively; senior in right of payment to all existing and future subordinated indebtedness of the Company and the Note Guarantors and guarantees thereof; and structurally subordinated to all existing and future indebtedness and other liabilities of any of the Company’s subsidiaries that do not guarantee the New Second Lien Notes.

The New Second Lien Notes and New Second Lien Note Guarantees have the benefit of second-priority liens on the collateral of the Company and the Note Guarantors. Consequently, the New Second Lien Notes rank effectively junior in priority to the Company’s obligations under the Exit ABL Facility, the New First Lien Notes and other first priority obligations (to the extent of the value of such collateral); equal with holders of other obligations secured pari passu with the New Second Lien Notes (to the extent of the value of such collateral); effectively senior to any junior priority obligations (to the extent of the value of such collateral); and effectively senior to any senior unsecured obligations (to the extent of the value of such collateral).

Interest on the New Second Lien Notes is payable at 4.69% per annum, semiannually to holders of record at the close of business on April 1 or October 1 immediately preceding the interest payment date on April 15 and October 15 of each year, commencing on April 15, 2015. The Company may redeem some or all of the New Second Lien Notes at any time at a redemption price of 100% of the principal amount plus accrued and unpaid interest.

General

The New First Lien Notes Indenture and the New Second Lien Notes Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of the Company’s subsidiaries to (i) incur or guarantee additional indebtedness or issue preferred stock; (ii) grant liens on assets; (iii) pay dividends or make distributions to the Company’s stockholders; (iv) repurchase or redeem capital stock or subordinated indebtedness; (v) make investments or acquisitions; (vi) enter into sale/leaseback transactions; (vii) incur restrictions on the ability of the Company’s subsidiaries to pay dividends or to make other payments to us; (viii) enter into transactions with the Company’s affiliates; (ix) merge or consolidate with other companies or transfer all or substantially all of the Company’s assets; and (x) transfer or sell assets.

Springing Lien Notes

In connection with the consummation of the Plan, the Company’s existing 9.00% Springing Lien Dollar Notes due 2021 and 9.50% Springing Lien Euro Notes due 2021 were converted into the new equity of the Successor Company (resulting in the issuance of 11,791,126 shares of New Common Stock), subject to dilution by the management incentive plan and the Rights Offering Stock. Additionally, holders of the Springing Lien Notes were given subscription rights in the Rights Offerings (resulting in the issuance of 36,197,874 shares of New Common Stock (including shares issued in connection with the Backstop Commitment)).

Senior Subordinated Notes

In connection with the consummation of the Plan, the Company’s Senior Subordinated Notes were canceled on account of the subordination provisions set forth in the indenture to the Senior Subordinated Notes.

Pro Forma Debt Obligations

The components of debt outstanding at September 30, 2014, as adjusted for the pro forma effects of the consummation of the Plan and fresh-start accounting, is as follows:

The Company is involved in various legal proceedings in the ordinary course of business and had reserves of $4 at both September 30, 2014 and December 31, 2013 for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable, all of which are included in “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets.

Italian Tax Claim

On June 17, 2014, an Italian tax court of appeals (the “Italian Court of Appeals”) decided against the Company related to its 2003 income tax position resulting from the acquisition by General Electric Company (“GE”) of an Italian company in the same year. GE subsequently sold this Italian subsidiary to the Company as part of the acquisition of GE Advanced Materials in 2006 (the “GE Advanced Materials Acquisition”). Having considered the use of debt financing and other characteristics of the acquisition by GE, the Italian Court of Appeals determined that the goodwill amortization and interest expense related to the acquisition by GE were not deductible for tax purposes. Prior to this decision, the Company had received favorable rulings by lower level Italian trial courts in a series of similar cases regarding the same matter.

On August 7, 2014, the Italian Court of Appeals affirmed the prior decisions of the Italian tax trial courts in the Company’s favor regarding the deductions made in the years 2004 through 2007. The Company is currently preparing to appeal the adverse decision related to the 2003 tax year before the Italian Supreme Court and believes it has a considerable likelihood of obtaining a favorable outcome. As of September 30, 2014, the total potential assessment, including penalties and interest, is €45, or approximately $57, of which €30, or approximately $38, relates to the period of ownership subsequent to the GE Advanced Materials Acquisition.

The Company continues to believe its tax filing position is appropriate and that it is more likely than not this position will prevail upon appeal to the Italian Supreme Court. As a result, the Company has not recorded any income tax liability related to this matter as of September 30, 2014. Additionally, in conjunction with the GE Advanced Materials Acquisition, the Company and GE entered into an agreement providing for the indemnification by GE for tax matters related to the GE Advanced Materials Acquisition. The Company is currently evaluating the impact of this agreement on its potential exposure.

Backstop Commitment Agreement Premium

On June 23, 2014, the Court found that the terms and conditions of the Support Agreement were fair, reasonable and the best available to the Debtors under the circumstances, and issued an order authorizing and directing the Debtors to enter into, execute, deliver and implement the BCA. As a result, the Company is obligated to pay all fees and expenses related to the BCA, including, among other things, the payment of the BCA Commitment Premium to the Commitment Parties (see Note 2). Pursuant to the terms of the BCA, the BCA Commitment Premium was deemed earned, nonrefundable and non-avoidable upon entry of the approval order by the Court. The Company recognized a $30 liability for the BCA Commitment Premium as of September 30, 2014 under the guidance for accounting for liability instruments. This amount is included in “Reorganization items, net” in the unaudited Condensed Consolidated Statements of Operations and “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets. Upon application of fresh-start accounting, on October 24, 2014, the BCA Commitment Premium will be converted to equity in the unaudited Condensed Consolidated Balance Sheets.

Environmental Matters

The Company is involved in certain remediation actions to clean up hazardous wastes as required by federal and state laws. Liabilities for remediation costs at each site are based on the Company’s best estimate of discounted future costs. As of both September 30, 2014 and December 31, 2013, the Company had recognized obligations of $6 for remediation costs at the Company’s manufacturing facilities and offsite landfills. These amounts are included in “Other long-term liabilities” in the unaudited Condensed Consolidated Balance Sheets.

Waterford, NY Site

The Company currently owns and operates a manufacturing site in Waterford, NY. In 1988, a consent decree was signed with the State

of New York which requires recovery of groundwater at the site to contain migration of specified contaminants in the groundwater. A groundwater

pump and treat system and groundwater monitoring program are currently operational to implement the requirements of this consent decree.

Due to the long-term nature of the project and the uncertainty inherent in estimating future costs of implementing this program, this liability was recorded at its net present value of $3, which assumes a 9% discount rate and a time period of 50 years. The undiscounted obligations, which are expected to be paid over the next 50 years, are approximately $15. Over the next five years the Company expects to make ratable payments totaling $2.

The following are the components of the Company’s net pension and postretirement benefit expense for the three and nine months ended September 30, 2014 and 2013:

Pension Benefits

Non-Pension Postretirement Benefits

Three Months Ended September 30,

Three Months Ended September 30,

2014

2013

2014

2013

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

Service cost

$

2

$

1

$

2

$

1

$

1

$

—

$

—

$

—

Interest cost on projected benefit obligation

2

1

2

1

1

—

1

—

Expected return on assets

(2

)

—

(1

)

—

—

—

—

—

Curtailment gain (1)

—

—

(3

)

—

—

—

—

—

Amortization of prior service cost

—

—

—

—

1

—

—

—

Amortization of net losses (gains)

—

—

—

1

(1

)

—

—

—

Net expense

$

2

$

2

$

—

$

3

$

2

$

—

$

1

$

—

Pension Benefits

Non-Pension Postretirement Benefits

Nine Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

Service cost

$

6

$

5

$

7

$

5

$

2

$

—

$

2

$

—

Interest cost on projected benefit obligation

6

3

6

3

3

—

3

—

Expected return on assets

(6

)

—

(5

)

(1

)

—

—

—

—

Curtailment gain (1)

—

—

(3

)

—

—

—

—

—

Amortization of prior service cost

—

—

—

—

1

—

1

—

Amortization of net losses (gains)

—

1

—

1

(1

)

—

—

—

Net expense

$

6

$

9

$

5

$

8

$

5

$

—

$

6

$

—

(1)

The curtailment gain recognized on pension benefits during the three and nine months ended September 30, 2013 relates to the remeasurement of the pension benefit obligation in conjunction with the ratification of the new collective bargaining agreement in July 2013.

12. Segment Information

The Company’s businesses are based on the products that the Company offers and the markets that it serves. At September 30, 2014, the Company’s two businesses are managed as one reportable segment; however, given the differing technology and marketing strategies, the Company reports the results for the Silicones and Quartz businesses separately.

The Silicones business is engaged in the manufacture, sale and distribution of silanes, specialty silicones and urethane additives. The Quartz business is engaged in the manufacture, sale and distribution of high-purity fused quartz and ceramic materials. The Company’s businesses are organized based on the nature of the products they produce.

The Company’s organizational structure continues to evolve. It is also continuing to refine its business and operating structure to better align its services to its customers and improve its cost position, while continuing to invest in global growth opportunities.

Following are net sales and Segment EBITDA (earnings before interest, income taxes, depreciation and amortization) by business. Segment EBITDA is defined as EBITDA adjusted for certain non-cash items and certain other income and expenses. Segment EBITDA is the primary performance measure used by the Company’s senior management, the chief operating decision-maker and the board of directors to evaluate operating results and allocate capital resources among businesses. Segment EBITDA is also the profitability measure used to set management and executive incentive compensation goals. Other is primarily general and administrative expenses that are not allocated to the businesses, such as shared service and administrative functions.

Inter-business sales are not significant and, as such, are eliminated within the selling business.

Segment EBITDA:

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Silicones

$

75

$

55

$

206

$

193

Quartz

5

11

19

27

Other

(17

)

(11

)

(48

)

(34

)

Reconciliation of Segment EBITDA to Net Loss:

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Segment EBITDA:

Silicones

$

75

$

55

$

206

$

193

Quartz

5

11

19

27

Other

(17

)

(11

)

(48

)

(34

)

Reconciliation:

Items not included in Segment EBITDA:

Non-cash charges

(145

)

1

(116

)

(4

)

Restructuring and other costs

(6

)

(9

)

(20

)

(17

)

Reorganization items, net

(44

)

—

(114

)

—

Total adjustments

(195

)

(8

)

(250

)

(21

)

Interest expense, net

(36

)

(77

)

(153

)

(234

)

Income tax benefit

23

5

2

—

Depreciation and amortization

(54

)

(42

)

(137

)

(129

)

Net loss

$

(199

)

$

(67

)

$

(361

)

$

(198

)

Items Not Included in Segment EBITDA

Not included in Segment EBITDA are certain non-cash items and other income and expenses. For the three and nine months ended September 30, 2014, non-cash charges primarily included net unrealized foreign exchange transaction losses related to certain intercompany arrangements and losses on the disposal of certain assets. For the three and nine months ended September 30, 2013, non-cash charges primarily included net foreign exchange transaction gains and losses and asset disposal gains and losses. For the three and nine months ended September 30, 2014 and 2013, restructuring and other costs primarily included expenses from our restructuring and cost optimization programs. For the nine months ended September 30, 2014, restructuring and other costs also included costs associated with restructuring our capital structure incurred prior to the Bankruptcy Filing. For the nine months ended September 30, 2014, these costs were partially offset by a gain related to a claim settlement. For the three and nine months ended September 30, 2014, reorganization items, net represented incremental costs incurred directly as a result of the Bankruptcy Filing, including certain professional fees, the BCA Commitment Premium and financing fees related to our DIP Facilities.

Following is a summary of changes in “Accumulated other comprehensive income” for the three and nine months ended September 30, 2014 and 2013:

Three Months Ended September 30, 2014

Three Months Ended September 30, 2013

Defined Benefit Pension and Postretirement Plans

Foreign Currency Translation Adjustments

Total

Defined Benefit Pension and Postretirement Plans

Foreign Currency Translation Adjustments

Total

Beginning balance

$

(36

)

$

225

$

189

$

(67

)

$

181

$

114

Other comprehensive (loss) income before reclassifications, net of tax

(22

)

(1)

52

30

13

20

33

Amounts reclassified from Accumulated other comprehensive income, net of tax

—

—

—

1

—

1

Net other comprehensive (loss) income

(22

)

52

30

14

20

34

Ending balance

$

(58

)

$

277

$

219

$

(53

)

$

201

$

148

Nine Months Ended September 30, 2014

Nine Months Ended September 30, 2013

Defined Benefit Pension and Postretirement Plans

Foreign Currency Translation Adjustments

Total

Defined Benefit Pension and Postretirement Plans

Foreign Currency Translation Adjustments

Total

Beginning balance

$

(37

)

$

239

$

202

$

(65

)

$

245

$

180

Other comprehensive (loss) income before reclassifications, net of tax

(22

)

(1)

38

16

10

(44

)

(34

)

Amounts reclassified from Accumulated other comprehensive income, net of tax

1

—

1

2

—

2

Net other comprehensive (loss) income

(21

)

38

17

12

(44

)

(32

)

Ending balance

$

(58

)

$

277

$

219

$

(53

)

$

201

$

148

(1)

This amount relates to unrecognized losses recorded in conjunction with the remeasurement of certain defined benefit pension obligations due to the renegotiation of certain collective bargaining agreements.

Amount Reclassified From Accumulated Other Comprehensive Income for the Three Months Ended:

Amortization of defined benefit pension and other postretirement benefit items:

Amount Reclassified From Accumulated Other Comprehensive Income for the Nine Months Ended:

Amortization of defined benefit pension and other postretirement benefit items:

September 30, 2014

September 30, 2013

Location of Reclassified Amount in Income

Prior service costs

$

1

$

1

(2)

Actuarial losses

—

1

(2)

Total before income tax

1

2

Income tax benefit

—

—

Income tax expense

Total

$

1

$

2

(2)

These accumulated other comprehensive income components are included in the computation of net pension and postretirement benefit expense (see Note 11).

14. Income Taxes

The effective tax rate was 10% and 7% for the three months ended September 30, 2014 and 2013, respectively. The effective tax rate was 1% and 0% for the nine months ended September 30, 2014 and 2013, respectively. The change in the effective tax rate was primarily attributable to the amount and distribution of income and loss among the various jurisdictions in which the Company operates. The effective tax rates were also impacted by operating losses generated in jurisdictions where no tax benefit was recognized due to the maintenance of a full valuation allowance.

For the three and nine months ended September 30, 2014, income taxes included favorable discrete tax adjustments of $23 and $9, respectively, pertaining to unrealized losses on intercompany transactions and the resolution of certain tax matters in U.S. and non-U.S. jurisdictions. For both the three and nine months ended September 30, 2013, income taxes included favorable discrete tax adjustments of $9 pertaining to pension curtailment, adjustments made to prior year intercompany transactions and the resolution of certain tax matters in U.S. and non-U.S. jurisdictions.

The Company is recognizing the earnings of non-U.S. operations currently in its U.S. consolidated income tax return as of September 30, 2014, and is expecting that all earnings will be repatriated to the United States. The Company has accrued the incremental tax expense expected to be incurred upon the repatriation of these earnings.

As a result of the conditions related to the Company’s ability to continue as a going concern described in Note 1, beginning in the fourth quarter of 2013, the Company was no longer able to assert permanent reinvestment with respect to certain intercompany arrangements previously considered indefinite, and is now recording deferred taxes on the foreign currency translation impact.

15. Guarantor/Non-Guarantor Subsidiary Financial Information

As of September 30, 2014, the Company had outstanding $1,100 in aggregate principal amount of first-lien notes and $250 in aggregate principal amount of senior secured notes, $1,161 in aggregate principal amount of springing lien Dollar notes €133 ($184) in aggregate principal amount of springing lien Euro notes and $382 in aggregate principal amount of senior subordinated notes. The notes are fully, jointly, severally and unconditionally guaranteed by the Company’s domestic subsidiaries (the guarantor subsidiaries). The following condensed consolidated financial information presents the Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013 and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 of (i) Momentive Performance Materials Inc. (Parent); (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; and (iv) the Company on a consolidated basis.

These financial statements are prepared on the same basis as the consolidated financial statements of the Company except that investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The guarantor subsidiaries are 100% owned by Parent and all guarantees are full and unconditional, subject to certain customary release provisions set forth in the applicable Indenture. Additionally, the secured credit facilities are secured by, among other things, most of the assets of the Parent, the guarantor subsidiaries and certain non-guarantor subsidiaries, subject to certain exceptions and permitted liens. There are no significant restrictions on the ability of Parent to obtain funds from its domestic subsidiaries by dividend or loan.